Inflation continues to decrease – The Daily Tearsheet

Vital Statistics:

Stocks are flattish despite a decent CPI print. Bonds and MBS are up small.

We have a 10 year auction at 1:00 this afternoon.

Prices at the consumer level rose 0.1% MOM and 2.4% YOY according to the Consumer Price Index. The core rate, which excludes food and energy, rose 0.1% MOM and 2.3% YOY. All of these numbers were better than expectations.

Shelter rose 0.3% MOM and 3.9% YOY and accounted for most of the increase in inflation. Overall, the CPI continues to work its way lower and is gradually approaching the Fed’s target rate.

Of course this probably won’t make any difference for the Fed, but so far the effect of tariffs has yet to show up in the inflation data. In fact, inflation is still falling, not increasing.

The Fed is not expected to cut rates next week, however we are still tight by 100 basis points in the Fed Funds rate.

Mortgage applications rose 12.5% last week as purchases rose 10% and refis increased 16%. Note there is an adjustment to the data for the Memorial Day holiday. “Coming out of the Memorial Day holiday, mortgage applications increased to the highest level in over a month, driven by growth in both purchase and refinance applications. Treasury rates saw some movement during the week, which resulted in additional opportunities for borrowers,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The rate for 15-year fixed rate loans and FHA loans saw declines last week, while the 30-year fixed rate was largely unchanged. Purchase applications were 20% ahead of last year’s pace, continuing to show strength compared to a year ago. Despite ongoing uncertainty surrounding the economy, homebuyers seem to be taking advantage of loosening housing inventory in certain markets.”

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The US apparently has a deal with China to supply rare earth elements and magnets, and is close to a trade deal. In return, the US will allow Chinese students to attend US universities.